HO Insurance Protection

hunter05

Hi all...new member here. I will try to keep this short. Our company is currently doing some hurricane repairs on houses and we have been struck with a mind numbing client. We got this one as a referral, and they have roof damage, interior water damage, etc. We bid the repairs, which were higher than the H/O ins. adjusters' estimate (surprise!?), and after we had several talks with the ins. co, they sent the H/O additional $$ (several thousand) to meet our figure. A few days later I email the customer to let her know our start date, and get a reply stating that they have found a "much" cheaper bid, and are not using us, but thanks anyway. We have many hours invested as well as several site visits to this job. A neighbor calls me yesterday and tells me that the H/O is doing 1/10th of the repairs and using the rest of the $$ for hardwood & custom tile & covering their deductible with the rest.....WTF? There was obvious wet moldy batts & sheetrock that needed removed, and they are paying someone else to cover it up (instead of fix it right) using money that we fought to get! How can we protect ourselves from this happening again? We negotiate and firm up on price w/ the insurance companies and then the customer goes AWOL on us?! Please advise.

Ed the Roofer

By having them sign a contract with you in advance, contingent upon the scope of work being agreed upon with the insurance adjuster.

Then, even if the error prone adjuster submits a low-ball estimate, the insurance company is legally obligated to reimburse their contractually insured client the total amount of what the Replacement Cost amount of the contract, providing that you were not gouging them with extreme pricing and were within +/- the industry standard mean of such pricing.

Dollars in hand and greed are a tough thing to combat, but if you had them sign a contract, pending scope of work approval in advance, then your contract would have hit the defined benchmark for being activated and you would have a leg to stand on to enforce the contract.

For multiple trade types of work, the insurance company will "Generously" allow an amount of 10% for overhead and an additional 10% for profit.

Many contractors who make a living off of insurance work use Xactimate estimating software, so that their individual line items and prices coincide with the adjusters to eliminate the haggling. Would you be comfortable with the insurance industry setting your prices for you? If so, then invest then $ 1,500.00 in that software.

Ed

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Stone Mountain

Had that happen many time over the years.
Once had a guy whose fence was torn down by a car. I gave the insurance company a quote, they accepted, and then sent out a cheque to the homeowner in both our names. The HO rolled into our office one day and demanded that we stamp the back, so he could cash it. When I asked when we could start, he said he was going to do it himself and that our price was way too high!. I refused to use our company stamp unless he gave me a "fee". He called me a crook!

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hunter05

Exactly........and the part that burns me up the most is that the extra 5 grand that we worked our buts off to get for our scope is now going into their bank account! But all I can do is try to make my contracts more bulletproof and hope it doesn't happen again.

bwalley

Inform the insurance company of their plans, they most likely issued the check in the homeowners name as well as your company name, the HO may have forged your signature.

I had a client get a bid from me, I gave them a bid, insurance company paid the claim with our name on it, I signed the check, was only hired to do part of the work and the insurance company sent me a 1099.

Astrix

What you are describing, the HO using some of the insurance money for other work, is insurance fraud. The principle of insurance is to put you back in the exact same position you were before the claim happened, not more and not less. Therefore, if they are getting extra custom tile work done in addition to just the insurance repair, that is a big no-no. Same as with just cashing in the cheque and not doing the repair at all - also a big no-no. (The other example of being asked to stamp the cheque so the HO could cash it -- glad you didn't do that because that would have been abetting insurance fraud.)

As was mentioned, the insurance cheque will be in both the HO and GC's name, this is to ensure that the HO doesn't just cash the money and that the assigned GC does the work and gets paid.

If you were already in negotiations with the insurer and had their agreement to revise the repair price, then you in essence assisted with adjustment of the claim. Go direct to the insurance company and claim a fee for consultation work. They will pay reasonable expenses to you for this. Doesn't matter that you don't end up doing the actual work.

If you are so inclined, you can also drop them a hint of what the HO is up to re the fraud. The insurance company will appreciate it and will keep it anonymous if you ask them to. And, honestly, we all should appreciate you "whistleblowing" because these types of scenarios is what drives insurance premiums up -- the more the insurers pay out in claims, the more insurance premiums cost for all of us out there.

greg24k

Why are you surprised, HO do this all the time. The way I handle insurance jobs, is I come out, see what needs to be done and make an estimate, like anything else. If the HO need me to spend more additional time or days with them, my fee is $250 in hour on the whole house construction remodeling due to a serious damage, or $150 in hour on a smaller damages i.e tree falling on the roof, finished basement gets flooded, etc. I make them sign a retainer, and if I hired to do the job, the money for consultation will be subtracted from the total job cost. This way if I invest from 5-20 additional hours above the time I spent preparing an estimate, my time is covered, and if they go with someone else, I got paid for my time. Same when people call me and say we are buying a house, and we have inspection report and we like to get a price what will take to fix this items, so we can negotiate. I charge $150 dollars per hour to come out and go over the report, if they like to walk around the house and ask me all kinds of question, I have no problem spending a few extra hours being there answering any questions they might have, I am being paid for my time. Doing business this way always worked for me.

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Framer53

What you are describing, the HO using some of the insurance money for other work, is insurance fraud. The principle of insurance is to put you back in the exact same position you were before the claim happened, not more and not less. Therefore, if they are getting extra custom tile work done in addition to just the insurance repair, that is a big no-no. Same as with just cashing in the cheque and not doing the repair at all - also a big no-no. (The other example of being asked to stamp the cheque so the HO could cash it -- glad you didn't do that because that would have been abetting insurance fraud.)

That may be the case in Canada, but not in the US. You are insuring the home for a value, whetherr you do the work to bring it back is up to you!

SelfContract

[quote=Framer53;623139]What you are describing, the HO using some of the insurance money for other work, is insurance fraud. The principle of insurance is to put you back in the exact same position you were before the claim happened, not more and not less. Therefore, if they are getting extra custom tile work done in addition to just the insurance repair, that is a big no-no. Same as with just cashing in the cheque and not doing the repair at all - also a big no-no. (The other example of being asked to stamp the cheque so the HO could cash it -- glad you didn't do that because that would have been abetting insurance fraud.)

That may be the case in Canada, but not in the US. You are insuring the home for a value, whetherr you do the work to bring it back is up to you![/quote]


That's the way all insurance companies operate in US. They know & suspect "fraud" just like us too. They are NOT stupid business, but just like Uncle SAM, they are too big companies (national level) & don't have much $$resources & personel to investigate every little case like that every time further. They will claim every reimbursement check as their company "loss" profits on their tax/accounting/balance sheet to IRS that year end anyway.

Futhermore, they don't have to investigate frauds. They made a "record" of that HO's problem as being already fixed. Supposed later if HO has same problem again or ask to fix again, or selling house with defects, they WILL not be responsible for that problem again, they're done!!,, and the stupid HO will be stuck with his/her own responsibility/creation!

Astrix

That's not quite correct. The insurance company will determine what the real value of the damage is, or in the case of a total loss what the whole building costs to rebuild, and that is all they will pay.

If they would pay based solely on the amount of insurance you bought then lots of people would be insuring their $100,000 homes for $500,000 and hoping for a big fire. Insurance is not an investment savings plan.

P.S. - While the political and judicial systems are different between Canada and the USA (they are even different from state-to-state and province-to-province), the way that insurance policies are written is actually quite universal - the same principles and practices apply throughout North America.